The Chasm Companion: A Fieldbook to Crossing the Chasm and Inside the Tornadoby Paul Wiefels
In The Chasm Companion, The Chasm Group's Paul Wiefels presents readers with a new analysis of the ideas introduced in bestselling author Geoffrey Moore's classic books, Crossing the Chasm and Inside the Tornado, and focuses on how to translate these ideas into actionable strategy and implementation programs. This step-by-step fieldbook/em>/em>/em>
In The Chasm Companion, The Chasm Group's Paul Wiefels presents readers with a new analysis of the ideas introduced in bestselling author Geoffrey Moore's classic books, Crossing the Chasm and Inside the Tornado, and focuses on how to translate these ideas into actionable strategy and implementation programs. This step-by-step fieldbook is organized around three major concepts: how high-tech markets develop, creating market development strategy, and executing go-to-market programs based on the strategy.
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The Chasm Companion
A Fieldbook to Crossing the Chasm and Inside the Tornado
Back to the Basics
The ideas and concepts outlined in this book are built in part upon theories of high-tech market development first discussed in Crossing the Chasm, originally published in 1991, and Inside the Tornado, published in 1995. My partner, Geoffrey Moore, authored both books, and in them he defined and refined a vocabulary and framework for understanding how and why high-technology markets develop for discontinuous innovations, and why these markets evolve as they do. Over the years we have used our experience in consulting with technology-based organizations, both large and small, to hone these concepts further, adding to an ever widening body of work. We have added, modified, borrowed, and discarded ideas based on these experiences. And we are grateful that many of our clients are willing co-conspirators.
Since continuous innovations still account for a significant portion of modern economies, it is hardly surprising that much of the language of business and the specifics of modern marketing theory and practice continue to reflect this fact. Yet, the fastest-growing sectors of these same modern economies are now driven by discontinuities -- disruptive technologies that force changes in both strategy and behavior that are often counterintuitive to both buyer and seller. Thus, a knowledge and practice gap exists, a condition that is completely understandable when you compare the number of patents issued between 1900 and 1970 with the number issued since 1970. It is exactly this gap that high-tech organizations faceevery day. They must make sense of developing markets and business practices where, to paraphrase a line from the Star Trek TV series, "no one has gone before."
Since the basic function of business strategy is to create wealth for shareholders, employees, and society, we start our investigation with some basic principles and observations -- some long held, others gleaned from the technology market meltdown recently witnessed.
We begin by trying to make more sense of what has transpired during the recent past.
One way to describe the excessive valuations in the technology sector in the run-up to the year 2000, particularly those surrounding the Internet, is that investors fell under the spell of category power. Historically, when whole new paradigms -- underpinned by discontinuous innovations -- have entered the sector, they have driven massive transfers of valuation, much of which accumulates in the market-leading companies. Internet investors anticipated this trend and bid up the stocks of any company with a good story about how it would ride this latest hypergrowth category to wealth and power.
We are reminded of the old proverb "Many are called, but few are chosen." Now we want to examine the results of a few quarters of competitive performance before bidding up a stock. Instead of jumping on the bandwagon of companies declaring victory based on a declared strategy of preemptive market leadership, the markets wait to see if victory (a) has been achieved, (b) can be sustained, and (c) is worth anything once both conditions are satisfied.
The implications for management teams are straightforward enough. Quit fooling around (or fooling yourself) with strategy or businessmodel experiments and go make some money. Do this by focusing on your core business. Do it by selling something for cash to customers who pay their bills. Launch a new and exciting product or service. Penetrate a new market with a valuable value proposition. And when competition appears, show that you can hold it at bay not through discounts but through differentiated value.
Show Me the Value
Those of you who have read our most recent books, The Gorilla Game and Living on the Fault Line, may recall the concepts of Competitive Advantage Gap (GAP) and Competitive Advantage Period (CAP). GAP is the value of your company's differentiated offerings when compared with those of your direct competitors. CAP is the length of time that investors anticipate you can sustain that differentiated advantage. In the investment climate prior to March 2000, all the emphasis was on catching the next technology wave. This represented a focus (some would argue an obsession) on CAP, manifested as a fear that the current advantages enjoyed by the status quo would be summarily wiped out by an emerging new category -- the now legendary New Economy. While understanding CAP potential remains important, nowadays the emphasis is on demonstrating results in the present rather than in the future. We live now in a world dominated by GAP, the power to win business through differentiated offerings in viable, demonstrable, and compelling categories. Our first return to the basics should be dominated by that thought.
The implications of this for management are far-reaching. In surveying where to invest scarce resources for competitive advantage, The Chasm Group uses a Competitive Advantage Hierarchy model that isolates four general domains where companies can focus attention. They are:
- differentiated offerings -- denoted as offer power
- market segment domination -- denoted as customer power
- value chain leadership -- denoted as industry power
- new category participation -- denoted as category power
Category and industry power, i.e., the strength and importance of the value chain you operate within, have a greater effect on CAP and the long term; while your customer power, i.e., the number and type of customers that you have captured and the offers you have fielded to capture them, have more impact short-term on GAP. Investors currently feeling burned by new business models are turning away from new category participation, value chain domination, and other heady visions of the future. "Show us some differentiated offerings that make money today," they demand.
Show Me the Money
To be sure, value chain domination holds forth the promise of immense competitive advantage sustainable over long periods of time. It has long been the driving force behind the valuations of such behemoths as Cisco, Intel, Microsoft, and SAP. No one doubts that it is a great prize and worth much sacrifice to gain. But investors have learned that as a sustainable outcome for any particular company, it is improbable. And so they are prepared to search for other safe harbors as they seek more reliable returns from their increasingly scarce capital.The Chasm Companion
A Fieldbook to Crossing the Chasm and Inside the Tornado. Copyright © by Paul Wiefels. Reprinted by permission of HarperCollins Publishers, Inc. All rights reserved. Available now wherever books are sold.
Meet the Author
Paul Wiefels is a founding partner and managing director of The Chasm Group LLC, a strategy consulting firm serving technology-based companies and organizations around the world. He has worked in the high-tech industry for 20 years and speaks frequently to high-tech industry organizations. He lives in Half Moon Bay, California.
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The Chasm Companion is a "must read" for anyone serious about high-technology market strategy. Picking up where the best-selling Crossing the Chasm and Inside the Tornado books left off, author Paul Wiefels provides high-tech professionals with a very useful and real-world guide to successful market strategy. The book is clear, well-written, and thorough. It provides deep insight into what it takes to win in 5 key technology life cycle phases: Early Market, the Chasm, Bowling Alley, Tornado, and Main Street. Having seen Paul Wiefels' and the Chasm Group's client work first-hand over several years, it is obvious that The Chasm Companion is a "package" of proven methods for high-tech product and service success. Destined to become a classic.